US Internet firms need to better localize in China

By Li Qiaoyi Source:Global Times Published: 2017/1/4 23:23:39

Illustration: Peter C. Espina/GT

Illustration: Peter C. Espina/GT


While soon-to-be President Donald Trump seems to be readying the US for a trade war with China, many US Internet firms are still trying to seek a foothold in the Chinese market, one of the most desirable yet tough-to-crack destinations for Silicon Valley overlords and start-ups.

Apparently the rise of populism has done little to affect their appetite for a share of China's market. And just as domestic firms do in China, US companies are hoping to bring a product to the market that won't be easily ripped-off.

There are certainly a few US firms that are well placed in China, most notably professional network LinkedIn that has come across as the most-cited paradigm of an American tech firm achieving genuine success in the world's most populous market. But for most US dotcom firms, a great wall appears to stand in the way of their making inroads or progress in the lucrative market with a population of upwards of 1.3 billion. Amazon and Netflix are surely two recent examples of US Internet heavyweights struggling to achieve the Chinese dream.

While Amazon actually has operations in the world's second-largest economy, its Chinese marketplace is fighting local behemoths such as Alibaba's Tmall and Taobao and and its global Prime Video service is not available in China. Likewise, Amazon's video-streaming rival Netflix, which has repeatedly mentioned its China market ambition, has also failed to add China to its global streaming map.

This, in addition to Uber's sales of its China operations to local ride-hailing service Didi Chuxing this past summer, seems to suggest that the Chinese market is forbidden territory for US Internet firms.

However, that's hardly the case. Rather than dramatizing fears of the frustrating and impenetrable Chinese market, which might pave the way for Trump's proposed policies to bring back jobs, US Internet firms are advised to figure out ways to translate success on their home turf and in other parts of the world into viable business models for the Chinese market.

LinkedIn's success in China versus Google's departure from the country holds a crucial lesson for other US Internet firms that concessions are unavoidable for fitting into China's regulatory framework. Acting on impulses and indulging in complaints won't do any good for their China market ambitions, which, based on Chinese consumers' growing purchasing power and tech savviness, are something they can't afford to give up. After all, the days when foreign technology brands would be automatically perceived as superior are over.

In Netflix's case, China was not missing in the company's third-quarter letter to shareholders released in October, although the country was still off-limits to the video-streaming service provider. "The regulatory environment for foreign digital content services in China has become challenging," it said in the letter, generally considered as admitting its failure to break into China for now. Nevertheless, with plans to "license content to existing online service providers in China rather than operate our own service in China in the near term," Netflix is still pursuing its Chinese dream, albeit in a zigzag manner.

It's worth pointing out that China's tight regulatory environment for digital content services undoubtedly weighs on foreign businesses' access to or operations in the Chinese market. But that's just one hurdle to China's market. More often, overseas companies fail to localize or offer something unique that appeals to Chinese customers. Finding ways to get past regulatory constraints on foreign digital content and building local partnerships is surely a tough mission, but beyond that it's of equal, if not greater, importance for Amazon and Netflix to mull over the viability of their business models in China. With a handful of local video-streaming services offering a wide range of TV shows, movies and self-produced content for comparatively more affordable prices, the two US giants would likely struggle to achieve success even if they were to clear all regulatory roadblocks, especially considering China's online payment realm divided between Tencent and Alibaba which also offer video-streaming services.

It would make more sense if foreign Internet firms could pinpoint and fill in a gap their Chinese rivals have yet to set an eye on or wouldn't do as good a job at. It is believed that whoever figures out the knack for viably localizing their businesses will succeed in China, regardless of constraints in the market.

The author is a reporter with the Global Times.


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